Here’s Why Synergy Pharma Shares Soar 10% Today

Synergy Pharmaceuticals (NASDAQ: SGYP) shares ended the day up over 10% after Cantor Fitzgerald initiated coverage on SGYP yesterday. Check out the daily chart on SGYP.


Source: TradingView

Let’s take a look at what Cantor Fitzgerald analyst William Tanner stated, as well as reasons for traders to be bullish and bearish on the stock.

Cantor Fitzgerald Initiates Coverage on Synergy Pharmaceuticals

Cantor Fitzgerald initiated coverage on Synergy Pharmaceuticals with an Overweight rating, and set a price target of $11 per share. Now, analyst William Tanner believes that Trulance (plecanatide) and dolcanatide could potentially increase the share value in the treatment of gastrointestinal disorders. The analyst also noted that Trulance’s launch metrics, which was approved by the U.S. Food and Drug Administration (FDA) in January for the treatment of chronic idiopathic constipation in adults, will drive the stock’s performance over the near term. By next year, Tanner believes that the expectation for the approval and the launch of the IBSC indication could be key drivers of the stock price.

That said, let’s take a look at some valuation metrics and statistics in SGYP.

What You Need to Know About Synergy Pharma

  • Synergy Pharmaceuticals ended the day up over 10%, following Cantor Fitzgerald’s initiated coverage on the stock, at Overweight with a price target of $11.
  • SGYP shares have been down over 35% over the past three months, while the specialty and generic drug manufacturers industry was only down 4.87% over the same period.
  • Synergy Pharma has 200.35M shares floating, 224.95M shares outstanding and 54.43M shares short. Consequently, SGYP has a short interest of 27.17% and a short interest ratio, or days to cover ratio, of 11.45.
  • SGYP has been operating at a loss, and therefore, it does not have a price-to-earnings ratio (P/E). However, its industry has an average trailing 12-month P/E of 68.7.
  • SGYP had a price-to-book ratio of 7.9, while the industry average is 1.6.
  • Synergy has an abnormally high trailing 12-month price-to-sales ratio of nearly 7,000, while the industry average was 2.4 over the same period.
    • Although SGYP has extremely high valuation ratios, this is common for micro- and small-cap stocks.
  • Synergy Pharmaceuticals will be presenting a corporate update at the Jefferies Global Healthcare Conference in New York City, on June 8, 2017 at 2:00 PM ET, and traders should be focused on this catalyst event.
  • SGYP had a falling wedge pattern, and gapped up above the upper downtrend line in this pattern, and could potentially continue to build momentum.

Bull Case

Traders may be bullish on SGYP due to Cantor Fitzgerald’s initiated coverage on the stock. Additionally, the stock has a high short interest, and if there are more positive catalysts in SGYP, this could potentially cause a short squeeze. Synergy also broke out of its falling wedge pattern, and could continue to build momentum over the short term. Moreover, some traders may be looking at this as a potential mean reversion trade, since the stock has been beat up.

Bear Case

Conversely, there are also some reasons why traders may be bearish on the stock. The stock has been down over 30% over the past three months, and traders may be looking for the stock to continue this momentum to the downside. Moreover, some of SGYP’s valuation ratios may be indicating its overvalued. Not only that, but over 25% of the floating shares is short, and this could be an indication of bearish sentiment in SGYP.

The Bottom Line

SGYP shares were up over 10% on the day, and over 1% during the after hours at 4:35 PM ET. Now, the primary reason for this rise was due to Cantor Fitzgerald’s coverage on SGYP. That in mind, there are some reasons why traders may want to be short the stock, as well as reasons why some traders want to be long SGYP.



Please enter your comment!
Please enter your name here